Reader Question: We want to know the different home pricing strategies when selling a home. We will be selling our home in the spring. We have had an appraisal, two agent opinions, and done research ourselves. There is a range between the highest and the lowest estimate of 40K. We do not have a deadline for occupancy. The market here is balanced between buyer and seller. The appraiser told us there are different home pricing strategies when selling a home. What can you tell us about pricing options when we enter the market?
Monty’s Answer: Home sellers utilize several strategies to enter the market. Most often, personal circumstances drive decisions. Examples are employment, changes in family size, medical, financial, too much work, and many others. Different motivations can affect pricing.
Defining the range of value
All of these options depend on the quality of the data. My experience is that home sellers’ ideas are often biased, plus biased agent price opinions and poor appraisals reduce the quality of the value range. Look objectively at the comparables and the adjustments to judge if they are reasonable when setting the value range.
Five different tactics
- The fire sale - Emotionally driven by financial distress, emotional turmoil, or disingenuous advice. Occasionally, the seller is financially independent and has no time or interest in doing anything but signing a deed. The owner wants to get rid of it today. These sellers are often below the low-end of the home’s value range which can be poorly maintained or , occasionally, in mint condition.
- The low end of the value range - Typically where homeowners have not taken proper care of the property. Many home buyers will not consider a home that needs work, but many seek homes that need work. It is a great way to gain sweat equity.
- The mid-range of value - Where the home has visible areas that will require attention but are easily maintained. All homes wear out naturally unless the owner intervenes. Showing wear, nicks in the walls and woodwork, and overgrown landscaping are examples.
- The high end of the value range - For homes in the most desirable neighborhoods. The home’s condition plays a role as well. These homes sell themselves when they are pristine with zero work. Many homebuyers will want to be the next owner.
- Testing the market - A strategy utilized when the homeowner has the luxury of time. They go to a market priced above the high end of the value range. This home features an appealing ”hook,” like a beachfront, and there are examples of the seller being right.
Some tactics rarely work where the seller could merely reduce the price. Examples are agent-selling bonuses, a car in the garage, mortgage buy-downs, and more. The five different home pricing strategies when selling a home listed above are common within the industry.